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Wind farms in Mexico to generate green power for Cemex cement company and the Wal-Mart retail chain

The Inter-American Development Bank (IADB) has approved US$102 million in partial financing for two wind facilities in the Mexican state of Oaxaca, which will establish a critical mass of renewable energy in the country and generate jobs in low-income rural communities.

The wind farms are part of Mexico’s strategy to diversify its energy matrix while reducing GHG emissions. The strategy, detailed in legislation approved in November 2008, includes a special programme to exploit wind and other renewable energy facilities that will contribute to the country’s goal of reducing GHG emissions by 50%.

The first wind farm involves a US$50m loan for the 251 MW Eurus facility currently under development by Acciona Energía México (AEM), a subsidiary of Spain’s Acciona Energía. At a total cost of US$525m, it is the largest wind project in Latin America and the Caribbean.

Mexico’s Cemex, a producer of cement and concrete, is an equity partner in the Eurus project and will purchase all its wind power output under a 20-year power purchase agreement. The IADB will also facilitate an additional loan of US$30m from the Climate Investment Fund for the Eurus project, and additional long-term financing is expected from other multilateral lenders, development finance institutions and commercial banks.

The 167 AW70 wind turbines have a nominal capacity of 1.5 MW each and a 230 kV transmission line will be built from the project site on the Isthmus of Tehuantepec, in the southeast region of Oaxaca, to the Juchitán II substation. The wind farm project was granted an environmental license by the Mexican authority SEMARNAT in June 2006, and was authorised in September 2008 with provisions for further assessment, monitoring and mitigation of potential impacts on migratory birds.

The second wind farm involves US$21m for a 68 MW facility under development by Eléctrica del Valle de México (EVM), an affiliate of EDF Energies Nouvelles of France. Four subsidiaries of Wal-Mart de México, one of the country´s largest retail chains, will purchase its wind output under 15-year purchase agreements, as part of Wal-Mart’s goal of using 100% renewable electricity in its Mexico operations.

The 27 Clipper Windpower wind turbines have nominal capacity of 2.5 MW each, and a 115 kV transmission line will be built from the project site in the municipalities of Juchitán de Zaragoza and Asunción Ixtaltepec, to the Juchitán II substation. The wind farm received an environmental permit in June 2003 from SEMARNAT, which was amended in July 2008 to incorporate modifications in design and provisions for further assessment and monitoring of potential impacts during operation (noise, impacts on migratory birds).

The IADB loan, combined with credits expected from multilateral and bilateral lenders, could cover US$103m of the EVM project’s total cost of US$190m.

“These projects are the fruit of Mexico’s pioneering strategy to support regulatory and financial conditions in which renewable power can improve energy security while reducing GHG emissions,” says Luis Alberto Moreno of IADB. “They also show that, even in a financial crisis, creative partnerships between governments, private companies and development finance institutions can lead to path-breaking investments that simultaneously advance human development and low-carbon economic growth.”

Both projects have included certified emission reduction credits in their plans.

The land for both wind farm projects has been leased from local ejidos, a traditional Mexican system of communal land ownership that is common in rural areas. The wind farms will provide jobs and a steady flow of income from leases for these communities.

Both projects will benefit from the strong winds in Oaxaca, which has some of the world’s best potential for wind power generation. Mexico plans to develop 2.5 GW of wind capacity in the state, and permits to develop 2 GW (including these two projects) have been issued already to private developers.

The government of Mexico estimates that a total of US$5 billion will be invested to build new wind farms by 2012, which will generate 4% of the country´s electricity. Direct and indirect employment of 10,000 jobs will be created during construction, and another 374 permanent jobs for operation and maintenance.

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